Commodity Corner

from Global News Journal:

Can export bans be challenged at the WTO?

Russia’s ban on grain exports as a heat wave parches crops in the world’s third biggest wheat exporter has raised questions whether such export curbs break World Trade Organization rules. Russia is not a member of the WTO, and it remains to be seen how its new grain policy will affect its 17-year-old bid to join. But other grain exporters, such as Ukraine, which is also considering export curbs, are part of the global trade referee.

WTO rules are quite clear that members cannot interfere with imports and exports in a way that disrupts trade or discriminates against other members. But in practice most WTO rules aim to stop countries blocking imports – shutting out competitor’s goods to give their own domestic producers an unfair advantage.

from MacroScope:

Argentina set for wheat windfall

Not everyone is upset about the 50 percent surge in wheat prices over the past month.

Wheat's rise to 2-year highs was caused first by heavy rains in Canada and now by a Russian export ban that was triggered by its worst drought in decades. There are floods in Pakistan, another major wheat grower. But while the wheat market shenanigans are triggering much hand-wringing across developing nations, Argentina, one of the world's top seven wheat exporters, may be set for a windfall.

Farmers there are increasing wheat plantings, the Buenos Aires Grains Exchange says. The South American country is expected to export around 8 million tonnes of wheat in the 2010-2011 year. With wheat futures on the Chicago Board of Trade at around $8 a bushel, a very simple calculation shows export revenues are going to very significant.

Investors are taking note.

RBC analysts are advising their clients to buy the Argentine peso against the dollar. The peso is trading at 3.933 at present but currency forwards markets are pricing in a 2.1 percent fall in the peso's value over the next three months. RBC reckons they could be wrong and sees "very strong grain commodity prices supporting higher FX export inflows."  That it hopes, will keep the peso stable to the dollar. Buying the peso now would mean a 2.1 percent gain over 3 months or almost 9 percent in annual terms.

Nick Chamie, strategist at RBC, now expects Argentina's economy to grow 6.5 percent this year -- more than the 5 percent he originally predicted. He points out the stronger wheat price has had a knock-on effect on other grains -- prices for soy and corn, of which Argentina is a top exporter, are up 11-13 percent over past month.

Arentina has a bad reputation with investors -- it defaulted on $100 billion in debt in 2002, a record for any sovereign. It only recently finished restructuring defaulted debt and is hoping to come back to bond markets soon. The grain price bonanza could make its job easier. Strong grain export revenues have already boosted central bank coffers to a record $51 billion.

Beef off menus, on agenda in Argentina

If there’s one thing that gets Argentines hot under the collar, it’s rising beef prices, so it’s not surprising that surging costs at the butcher shop are ringing alarm bells at the presidential palace.     Local TV stations are reporting a collapse in sales and some angry steak lovers have even set up a Facebook group to promote a one-week beef-eating strike. Some cuts have gone up by as much as 50 percent since the start of the year, according to local media, forcing government officials to play down the hikes as a temporary blip and blame their old enemies — the farmers.     Economy Minister Amado Boudou has blamed recent rains for the price rise, saying ranchers are keeping their animals out grazing on the lush Pampas pastures instead of sending them to market.     President Cristina Fernandez, who enthusiastically promoted pork as an alternative to beef by comparing it to Viagra last month, also pointed a finger at the weather, but took a pop at ranchers too.     “It’s true, beef’s gone up. It’s gone up a lot, as has the price the farmers are getting,” she said this week, drawing an angry response from farm leaders, who said short-sighted government policy and middlemen were the real villains.     The government has curbed exports on-and-off for years to keep a lid on the cost of the nation’s favorite food and the current spike in prices has raised the specter of fresh disruption to shipments from the country, a leading exporter.     But as beef becomes increasingly unaffordable, some Argentine shoppers might be taking the president’s pork recommendation a lot more seriously.

Farm fight gives Argentine newspapers plenty to chew on

Argentine farmers’ decision to resume their anti-government protests dominated Sunday’s newspaper editorials, with some commentators saying the seemingly never-ending conflict over soy taxes risked spilling into political turmoil and even violence (Joaquin Morales Sola in right-leaning La Nacion).

Most agreed the conflict’s resurgence was down to last week’s surprise announcement by President Cristina Fernandez to share the soy tax revenue with the provinces, which critics see as an election ploy ahead of a mid-term vote due in June. Farmers took as proof she is unwilling to lower the levy.

Some columnists criticized the government for erratic policies that have stoked the conflict at a delicate time for the country (Eduardo van der Kooy, in top-selling daily Clarin), saying Fernandez needed to change tack to reflect the changed economic reality (Miguel Bonasso in Critica).

Argentine media are increasingly critical of the government and few defended the president’s handling of the standoff. Leftist daily Pagina 12, which generally supports Fernandez, echoed her own defense of the soy taxes as a vital tool to encourage more diversity in crops and redistribute wealth among the poor.

Here are some key extracts from the leading newspapers’ best-known columnists: 

Joaquin Morales Sola, right-leaning, pro-countryside La Nacion:

The Perpetual war of the Pampas

It all looks very familiar. Argentina’s rebellious farmers are threatening to go back to their highway protests, the government is refusing to cut export taxes on soybeans and another showdown in Congress is on the horizon.

If ruling party lawmakers’ continue to refuse to take their seats and allow a vote on an opposition-led bill to cut the taxes, farmers will have a good excuse to resume road protests and a freeze on grains sales to starve the state of revenue.

President Cristina Fernandez will be loath to see another showdown on soy taxes after last year’s crushing defeat when her own vice president cast the deciding vote against her in the Senate, forcing the government to roll back the sliding-scale system that set off months of political turmoil.

Rather than risk another spectacular defeat, especially as she tries to move up mid-term elections to June, Fernandez could try to take the steam out of the opposition drive by lowering the taxes herself — and local media speculated this week that she was mulling such a move.

But government officials have ruled out that possibility.

Even if Fernandez were to offer a concession on the soy tax, it would likely be a small one because she would not want to lose too much face or too much income in an election year.

But a small reduction is unlikely to satisfy the farmers, making any resolution seem more distant than ever.

The Devil is in the details

Numbers, or rather the lack of them, are the latest gripe of Argentina’s disgruntled farm sector.

Statistics published by the government for years have been disappearing since the Agriculture Secretariat ceded control of the country’s multibillion-dollar grains and beef trade to another state agency, the ONCCA, earlier this year.

Little by little, the government has stopped updating routine tables detailing weekly grains export commitments and purchases by soy crushers. Weekly corn and wheat sales, with details of buyer countries, have not been published since June.

Some new information has been posted in its place, but it smells like a conspiracy to grains exporters, meatpackers and farmers, whose relationship with the center-left government of President Cristina Fernandez seems irreparably damaged following this year’s messy conflict over soy taxes.

“The ONCCA is trying to hide its errors by withholding information … Distorting, restricting or delaying publication is a grave shortcoming that conspires against the country’s development,” meatpackers’ chamber CICCRA said in an unusually strong-worded statement this week.

Such criticism has been swiftly rebutted by ONCCA chief Ricardo Etchegaray, a former head of customs described as a long-time ally of the president and her powerful husband, ex-President Nestor Kirchner.

“Since we started work in this office, we’ve been dedicated to bringing greater transparency to the agriculture trade,” the agency said in a statement earlier this month.

Argentine farmers return to sabre-rattling

It didn’t take long for Argentine farmers to lose their contented glow after defeating the government over a tax hike on soy exports earlier this year.

The calm that descended on the Pampas plains in the aftermath of the four-month farming conflict was predictably short-lived, and the disgruntled farmers are rattling their sabers again. While they haven’t said what they plan to do, the farm leaders have promised to announce their next move in the coming days.

Talks with the agriculture secretary have not eased their concerns over the state of the ranching industry, the dairy sector and the dreaded export taxes. Many farmers are worse off than with the higher rate, because they lost the rebates and subsidies that the government agreed to during the conflict.

This, coupled with the worst drought for decades and weaker grains prices due to the global financial turmoil mean the bad mood may be near breaking point in the countryside. Will they go on strike again? It’s hard to imagine. President Cristina Fernandez has successfully driven the farmers off the front pages and public sympathy does not look ready to rally behind them.

Argentine farmers say government has gone too far

Every time it looks like relations between Argentine farmers and the government have hit rock bottom, they get worse. Exasperated farmers have blocked ports, parked tractors across highways and refused to send their cattle to market in protest at a string of government measures. They even held a mass prayer rally, hoping the nation’s patron saint might help them resolve the three-year-old row. This time they have called a two-day strike in protest at an export tax hike that targets their most lucrative crops, soybeans and sunflowers. Officials say everyone should benefit from the grains bonanza, not just the countryside, which has historically fought with the government in Buenos Aires over the spoils of the country’s farming riches. They say there will still be an ample profit margin even with the new tax increases. But farmers say the government has gone too far, and will end up shooting itself in the foot by discouraging the production of the very goods that are swelling state coffers. Argentina has recovered some of its former fame as the bread basket of the world in recent years, but the rapid rise in export duties that has accompanied soaring global prices means few farmers are celebrating in the famous Pampas plains.

“The worst thing about all this despondency, is that we’re losing a culture.” one farmer told daily La Nacion. “I honestly don’t know if there’s any future in farming for my children.”